CSA Staff Notice 21-331: Information Processor for Exchange-Traded Securities other than Options

CSA Staff Notice 21-331
Information Processor for Exchange-Traded Securities other than Options June 23, 2022 Introduction Canadian Securities Administrators (CSA) staff (CSA staff or we) are publishing this notice to inform the public that the TMX Information Processor (TMX IP) will continue to act as an information processor (IP) for exchange-traded securities other than options1 under Regulation 21-101 respecting Marketplace Operation (Regulation 21-101) until June 30, 2026. This notice discusses the role of the IP and the terms and conditions under which it will continue to operate. In Ontario, Saskatchewan, Alberta, and British Columbia, TMX IP will be designated as an IP and subject to terms and conditions contained in a designation order. In Quebec, TMX IP will be recognized as an IP and subject to terms and conditions outlined in a recognition order. In all other jurisdictions, TMX IP will operate pursuant to a number of undertakings (which are similar to the terms and conditions to be set out in the Ontario, Saskatchewan, Alberta, British Columbia, and Quebec orders). This notice is also available on the websites of CSA jurisdictions, including:
www.lautorite.qc.ca www.albertasecurities.com www.bcsc.bc.ca www.fcnb.ca nssc.novascotia.ca www.osc.ca www.fcaa.gov.sk.ca www.mbsecurities.ca Transparency Requirements and the Need for an Information Processor An IP supports the transparency requirements in Part 7 of Regulation 21-101. 2 It collects, 1 In Québec, options are derivatives under the Derivatives Act (Québec) and are excluded from the definition of “exchange-traded securities.” 2 Subsection 7.1(1) requires a marketplace that displays orders of exchange-traded securities to a person to provide accurate and timely information regarding orders for the exchange-traded securities displayed by the marketplace to an IP or, in its absence, to an information vendor. Subsection 7.1(2) provides an exception for those marketplaces that only display orders to their employees or to persons retained by the marketplaces to assist in the operation of the marketplace, if the orders posted on the marketplaces meet the size threshold set by a regulation services provider. Subsection 7.2(1) of Regulation 21-101 requires marketplaces to provide information about trades in exchange￾traded securities to an IP or, in its absence, to an information vendor.

consolidates, and disseminates marketplace data and thus makes available at least one source of consolidated data to investors and market participants. The transparency requirements in Part 7 of Regulation 21-101 and, in particular, the availability of timely and accurate data, are critical to the regulatory framework and support fair and efficient markets and confidence in those markets. The provision of consolidated information by an IP facilitates compliance by marketplace participants with relevant regulatory requirements that apply in a multiple marketplace environment by ensuring the availability of consolidated data that meets regulatory standards and which users can use to demonstrate or evaluate compliance with these requirements.
Part 14 of Regulation 21-101 provides for the operation and regulatory requirements applicable
to an IP,3 which includes:

• a requirement to provide prompt and accurate order and trade information and to not
  unreasonably restrict fair access to such information;
• a requirement to provide timely, accurate, reliable and fair collection, processing, distribution
  and publication of information for orders for, and trades in, securities;
• an obligation to maintain reasonable books and records; and
• certain system requirements, including an annual independent systems review and
  vulnerability assessment.
  In addition, an IP is required to establish, in a timely manner, an electronic connection to each marketplace that is required to provide information under Regulation 21-101, and also to enter into an agreement with each such marketplace. The agreement must set out that the marketplace will provide the IP information in accordance with Part 7 of Regulation 21-101 and that it will comply with any other reasonable requirements set by the IP. In order to act as the IP, the CSA must determine that it is in the public interest for the entity to act as an IP for equity securities other than options. In addition, in Quebec, an IP needs to be recognized as an IP and subject to terms and conditions outlined in a recognition order. In Ontario, Saskatchewan, Alberta, and British Columbia, a designation order will be issued for an IP that also includes terms and conditions. 3 An IP is defined as in every jurisdiction except for British Columbia, any person that receives and provides information under Regulation 21-101 and has filed Form 21-101F5 and, in British Columbia, means a person that is designated as an information processor for the purposes of Regulation 21-101.

TMX IP
TMX IP has been the IP for exchange-traded securities other than options since July 1, 2009.4 TMX IP collects data from relevant marketplaces and is authorized to consolidate and disseminate this data in the form of the following products (together, the Consolidated Products):

• Consolidated Data Feed, which provides access to order and trade market data from each
  marketplace that contributes its data to the TMX IP (contributing marketplace);

• Consolidated Last Sale, which provides real-time trading data from all contributing
  marketplaces;

• Canadian Best Bid and Offer, which provides a consolidated best bid and offer for all
  Canadian exchange-traded securities other than options;

• Canadian Best Bid and Offer for Protected Only Marketplaces, which provides a
  consolidated view of the order book only for those marketplaces that have protected bids and offers under Part 6 of Regulation 23-101 respecting Trading Rules (Regulation 23-101), Order Protection;

• Consolidated Depth of Book, which provides a single consolidated view of the order book
  from the contributing marketplaces; and

• Consolidated Depth of Book for Protected Only Markets, which provides a single
  consolidated view of the order book for those marketplaces that have protected bids and offers under Part 6 of Regulation 23-101. To recover some of its operational costs, TMX IP uses a “pass-through” fee model, where the contributing marketplaces enter into contractual agreements with data vendors and subscribers directly, allowing each marketplace’s fees to be passed through to the clients of the IP. A monthly fee is charged by TMX IP for each of the Consolidated Products. The fees are published on the TMX IP’s website and reviewed by the CSA. TMX IP is subject to a number of undertakings,5 pursuant to which it agrees to:

• establish policies and procedures to address conflicts of interest related to the operation of the
  information processor by TMX Group Limited;
  4 CSA Staff Notice 21-309 Information Processor for Exchange-Traded Securities other than Options (CSA Staff Notice 21-309) was published in 2009 to inform the public that TMX IP would act as an IP between July 1, 2009 to June 30, 2014. In Québec, the Autorité des marchés financiers issued decision n° 2009-PDG-0047 on June 4, 2009. 5 CSA Staff Notice 21-309 includes the initial TMX IP undertakings, which were subsequently updated in CSA Staff Notice 21-313 Information Processor for Exchange-Traded Securities other than Options.

• distribute only the Consolidated Products and obtain approval from CSA staff to distribute
  additional products using the data provided to it by marketplaces;

• acknowledge that it does not have exclusive rights to consolidate and disseminate order and
  trade information;

• conduct an annual self-assessment of its compliance with subsections 14.4(2), (4), and (5) of
  Regulation 21-101 and with its performance with respect to the undertakings;

• provide a report of the self-assessment to the IP Governance Committee and file the report
  and the views of the IP Governance Committee with the CSA; and

• ensure that all data contributors are given access to the IP on fair and reasonable terms.
  These undertakings mirror the terms and conditions to the Ontario, Saskatchewan, Alberta, British Columbia, and Quebec orders. Local Matters Certain jurisdictions are publishing other information required by local securities legislation. In Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories, and Nunavut, this information is contained in Appendix A to this notice and consists of TMX IP’s Undertakings. Questions Please refer your questions to any of the following:
  Lucie Prince
  Analyste experte, Direction de l’encadrement des activités de négociation Autorité des marchés financiers lucie.prince@lautorite.qc.ca Alina Bazavan Senior Analyst, Market Regulation Ontario Securities Commission abazavan@osc.gov.on.ca Heather Cohen Senior Legal Counsel, Market Regulation Ontario Securities Commission hcohen@osc.gov.on.ca Gerald Romanzin Senior Regulatory Analyst, Market Oversight Alberta Securities Commission gerald.romanzin@asc.ca Bonnie Kuhn Senior Legal Counsel, Market Regulation Alberta Securities Commission bonnie.kuhn@asc.ca Lenworth Haye Senior Oversight Analyst, SRO Oversight British Columbia Securities Commission lhaye@bcsc.bc.ca

Elliott Mak
Senior Legal Counsel, Capital Markets
Regulation
British Columbia Securities Commission emak@bcsc.bc.ca Mobolanle Depo-Fajumo Legal Counsel, Securities Division Financial and Consumer Affairs Authority of Saskatchewan mobolanle.depofajumo2@gov.sk.ca